Political Economy, Political Theory and History

Beyond the ‘Republican’ Economy: Hayek and Pettit on Private Property

Republican political theorists have spilled a lot of ink in the attempt to present ‘republicanism’ as a distinctive alternative to liberalism. The landmark book is, of course, Philip Pettit’s Republicanism: A Theory of Freedom and Government, published in 1997. I have written about some of the problems of republicanism on this blog (here, here and here). The most recent post I’ve written has to do with the relationship between Pettit’s republicanism and Hayek’s liberalism. In this post, I’d like to address some of the republican literature regarding the market. As with the republican position on liberty, the republican approach to property and the market fails to differentiate itself from various strands of liberalism. On the one hand, republicans’ redistributive proposals do little to differentiate them from the ‘new’ liberalism of early twentieth century liberals like J. A. Hobson and L. T. Hobhouse—liberals that are completely ignored in the republican narrative of the history of liberalism. On the other hand, Pettit’s approach to property mirrors the Hayekian belief that private property emerges out of a gradual process of accidental exchange between free and equal individuals.

Pettit argues that the system of private property comprising the market ‘will not be a source of domination so far as it is the cumulative, unintended effect of people’s mutual adjustments’ and does not ‘license or issue from any form of domination.’ His discussion begins with the assumption that titles to the exclusive rights to property will enjoy legal sanction and that existing property relations are not the result of domination and do not accord any property owner powers of ‘domination’ over others (that is, slavery is not allowed). However, based on the assumptions that ‘the property regime sprang from a history of individual adjustments in which no domination occurred’, and that ‘the regime in place does not itself allow inequalities of a kind that facilitates what by independent criteria would count as domination’, Pettit considers it reasonable to assume that inequalities in the distribution of property will develop as a result of the proper workings of the market, as opposed to resulting from fraud or theft. Despite this development, however, Pettit emphasizes that it is the contingent effects resulting from the inegalitarian distribution of property that facilitates domination, not private property itself; and these contingent effects can be subject to institutional ‘adjustment’. Supposing that domination does emerge as a result of growing inequalities, the neo-republican position will sanction a redistribution of property or the imposition of restrictions on the ‘powers associated with absolute or relative wealth, so that inequality in non-domination is minimized.’ Therefore, as long as the current distribution of private property ‘sprang’ from a history of non-domination, and as long as current rights of private property do not grant any property owner rights of property in the person of another, then ‘any infringement of one person’s property rights by another will give cause for government concern, since it will have the aspect of arbitrary interference: it will arbitrarily impact on the property-holder’s options in disposing of the property.’ The inequality of property, in the absence of any ‘wrongdoing within the system,’ does not raise any concerns about domination per se.’

Two points are worth emphasizing here. The first is that, according to Pettit, private property—or more accurately, capitalist social property relations—emerge as a result of the cumulative, unintended effect of people’s mutual adjustments to their economic circumstances. The second point follows from the first assumption: that the development of capitalist social property relations neither stems from any coercive acts, nor sanctions any forms of domination (defined as the capacity for arbitrary interference). Now, one could easily turn to the closing chapters of Marx’s Capital in which he discusses the expropriation of the English peasantry through the ‘bloody legislation’ dating back to the sixteenth century to refute such a bloodless account of capitalist development; or one could read the scathing indictments of contemporaries like Gerard Winstanley who characterized the enclosure movement as a process of the murder, oppression and theft of the poor by the rich. But that is not the point. The point is to highlight how Pettit’s account is a fundamentally liberal account of capitalist forms of property. Compare Pettit’s republicanism with Hayek’s liberalism in The Constitution of Liberty. In his chapter Employment and Independence, Hayek rejects as ‘myth’ the idea that capitalist forms of private property emerged out of a process by which direct producers—namely, peasants, small tenant farmers and urban craftsmen—were dispossessed either through force or by means of the ‘rule of law’ (that is, the law of property). Hayek writes:

‘This is the myth that the appearance of a propertyless proletariat is the result of a process of expropriation, in the course of which the masses were deprived of those possessions that formerly enabled them to earn their living independently. The facts tell a very different story. Until the rise of modern capitalism, the possibility for most people of establishing a family and of rearing children depended on the inheritance of a home and land and the necessary tools of production. What later enabled those who did not inherit land and tools from their parents to survive and multiply was the fact that it became practicable and profitable for the wealthy to use their capital in such a way as to give employment to large numbers.’

In Hayek’s narrative, capitalist forms of private property also emerge out of a historical process devoid of any form of conflict, one in which those who did not inherit any property began to work for the rich. Lack of inheritance, not expropriation, coupled with the productive employment of voluntary labour lead to the development of capitalism. To paraphrase Pettit, capitalist social property relations emerged a result of the cumulative, unintended effect of people’s mutual adjustments to their economic circumstances. This cumulative, unintended process appears reminiscent of Hayek’s notion of ‘spontaneous order’. More specifically, it resembles a specific type of spontaneous order articulated by Hayek: that of catallaxy. For Hayek, catallaxy is a more appropriate term for an economy than is the term ‘economy’, given that latters’ association with the household, which implies the ordering of activity towards the attainment of a given end. Hayek prefers catallaxy because of its spontaneous, open-ended connotations; he uses it to describe ‘the order brought about by the mutual adjustment of many individual economies in a market. A catallaxy is thus the special kind of spontaneous order produced by the market through people acting within the rules of the law of property, tort and contract.’

All of this is part of Pettit’s republican argument for a basic income and can be classed as an attempt to outline some of the policy prescriptions that would form a republican ‘civic economy’ that would be differentiated from that of a liberal economy which presumably (and erroneously, as Hayek himself points out) is based on the liberal ideal of non-interference. The irony is that the basic income that republicans like Pettit believes to be the outcome of a distinctive republican approach to the economy was actually advocated by Hayek himself in Law, Legislation and Liberty:

‘The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.’